The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the Philippines
Background: Government borrowings could play an important role in maintaining economic stability; however, it is essential to keep the indebtedness manageable to ensure that debts continue contributing to economic growth. This concern is particularly relevant for the Philippine economy, which has fa...
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Center for Policy, Research and Development Studies
2025-06-01
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| Series: | Recoletos Multidisciplinary Research Journal |
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| Online Access: | https://rmrj.usjr.edu.ph/rmrj/index.php/RMRJ/article/view/2756 |
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| author | Edgar Detoya Jonecis Dayap Joey Estorosos Ma. Kresna Mansueto Randy Salazar Jesse Susada Maria Teresa Vito Jessica Magallon-Avenido |
| author_facet | Edgar Detoya Jonecis Dayap Joey Estorosos Ma. Kresna Mansueto Randy Salazar Jesse Susada Maria Teresa Vito Jessica Magallon-Avenido |
| author_sort | Edgar Detoya |
| collection | DOAJ |
| description | Background: Government borrowings could play an important role in maintaining economic stability; however, it is essential to keep the indebtedness manageable to ensure that debts continue contributing to economic growth. This concern is particularly relevant for the Philippine economy, which has faced recurring economic shocks, policy transitions, and fluctuating debt trajectories over the past decades.
Methods: This study analyzed the relationship between the debt-to-GDP ratio and GDP growth in the Philippines from 1986 to 2020, employing regression and correlation analyses to determine the optimal debt ratio. A quadratic regression model, demonstrating the highest adjusted R2 and lowest MSE, revealed a U-shaped non-linear relationship. It suggests an optimal debt-to-GDP ratio of 57.64% when including extraordinary events and 60.23% excluding them.
Results: Spearman's correlation indicated a significant negative correlation between debt and growth at lower debt levels. In comparison, the relationship at higher debt levels was inconclusive, highlighting the influence of external shocks and domestic policies. The study identified periods characterized by varying debt and growth dynamics, illustrating the complex interplay of natural disasters, financial crises, fiscal policies, and global economic conditions.
Conclusion: Ultimately, the findings emphasize the context-dependent nature of the debt-growth nexus, advocating for nuanced policy responses tailored to the Philippines' specific economic environment. These insights inform more adaptive fiscal policymaking in the Philippine context and offer implications for other emerging economies dealing with similar debt sustainability challenges. |
| format | Article |
| id | doaj-art-54cd62910d1044ceb499815c4ef3cb9f |
| institution | DOAJ |
| issn | 2423-1398 2408-3755 |
| language | English |
| publishDate | 2025-06-01 |
| publisher | Center for Policy, Research and Development Studies |
| record_format | Article |
| series | Recoletos Multidisciplinary Research Journal |
| spelling | doaj-art-54cd62910d1044ceb499815c4ef3cb9f2025-08-20T03:15:12ZengCenter for Policy, Research and Development StudiesRecoletos Multidisciplinary Research Journal2423-13982408-37552025-06-0113121122010.32871/rmrj2513.01.17The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the PhilippinesEdgar Detoya0https://orcid.org/0000-0003-1901-5467Jonecis Dayap1https://orcid.org/0000-0003-1047-1490Joey Estorosos2https://orcid.org/0000-0003-3130-6195Ma. Kresna Mansueto3https://orcid.org/0000-0003-3436-012XRandy Salazar4https://orcid.org/0000-0002-0051-5181Jesse Susada5https://orcid.org/0000-0003-1563-1377Maria Teresa Vito6https://orcid.org/0009-0000-0172-6928Jessica Magallon-Avenido7https://orcid.org/0000-0002-8033-1672(1) School of Business and Management, University of San Jose-Recoletos, Cebu City, Philippines (2) Graduate School of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Arts and Sciences, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Arts and Sciences, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Management, University of the Philippines Cebu, Cebu City, PhilippinesSchool of Engineering, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesSchool of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesGraduate School of Business and Management, University of San Jose-Recoletos, Cebu City, PhilippinesBackground: Government borrowings could play an important role in maintaining economic stability; however, it is essential to keep the indebtedness manageable to ensure that debts continue contributing to economic growth. This concern is particularly relevant for the Philippine economy, which has faced recurring economic shocks, policy transitions, and fluctuating debt trajectories over the past decades. Methods: This study analyzed the relationship between the debt-to-GDP ratio and GDP growth in the Philippines from 1986 to 2020, employing regression and correlation analyses to determine the optimal debt ratio. A quadratic regression model, demonstrating the highest adjusted R2 and lowest MSE, revealed a U-shaped non-linear relationship. It suggests an optimal debt-to-GDP ratio of 57.64% when including extraordinary events and 60.23% excluding them. Results: Spearman's correlation indicated a significant negative correlation between debt and growth at lower debt levels. In comparison, the relationship at higher debt levels was inconclusive, highlighting the influence of external shocks and domestic policies. The study identified periods characterized by varying debt and growth dynamics, illustrating the complex interplay of natural disasters, financial crises, fiscal policies, and global economic conditions. Conclusion: Ultimately, the findings emphasize the context-dependent nature of the debt-growth nexus, advocating for nuanced policy responses tailored to the Philippines' specific economic environment. These insights inform more adaptive fiscal policymaking in the Philippine context and offer implications for other emerging economies dealing with similar debt sustainability challenges.https://rmrj.usjr.edu.ph/rmrj/index.php/RMRJ/article/view/2756gross domestic productdebtdebt trapeconomic growthdata miningpolynomial regressionphilippineseconomy |
| spellingShingle | Edgar Detoya Jonecis Dayap Joey Estorosos Ma. Kresna Mansueto Randy Salazar Jesse Susada Maria Teresa Vito Jessica Magallon-Avenido The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the Philippines Recoletos Multidisciplinary Research Journal gross domestic product debt debt trap economic growth data mining polynomial regression philippines economy |
| title | The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the Philippines |
| title_full | The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the Philippines |
| title_fullStr | The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the Philippines |
| title_full_unstemmed | The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the Philippines |
| title_short | The Impact of Debt-to-GDP Ratio on the GDP Growth Rate of the Philippines |
| title_sort | impact of debt to gdp ratio on the gdp growth rate of the philippines |
| topic | gross domestic product debt debt trap economic growth data mining polynomial regression philippines economy |
| url | https://rmrj.usjr.edu.ph/rmrj/index.php/RMRJ/article/view/2756 |
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